How could B2C2 buying loans from Genesis prevent contagion?

The effects of The insolvency of FTX and the crypto-contagion continues to spread rapidly through the industry. Over the past two weeks, several companies have revealed their exposure to the exchange going bankrupt, followed by flaws in handling user withdrawals. One such company affected is the cryptocurrency lending arm of Genesis, which could aggravate the cascade effect of the current liquidity crisis, should the company close.

Genesis reportedly suspended customer withdrawals and new loans on Oct. 16, citing a “cash shortage due to certain illiquid assets on its balance sheet,” resulting from exposure to the Sam Bankman-Fried stock exchange. A Reuters report on Thursday noted that Genesis applied for an emergency loan of about $1 billion before choosing to suspend operations.

How B2C2 Could Support Crypto Contagion

Genesis’s decision to suspend withdrawals could mean the company failed to raise an emergency loan to bolster its liquidity. Nonetheless, B2C2 has shown interest in mitigating Genesis’ cash crunch which, if it occurs, could mitigate the spread of crypto-contagion.

B2C2, a prominent cryptocurrency market maker, Free to buy existing loans in Genesis’ book, shortly after the loan company admitted it was facing liquidity problems. However, B2C2 noted that Genesis lending must fit within its established risk management framework for the proposal to proceed.

The company is able to support the broader market by offering to work with Genesis and its counterparties to transform existing Genesis Global Capital loans into B2C2. Loans will need to fit within our established risk management framework to qualify.

B2C2

Speaking about it, B2C2 founder Max Boonen said he “didn’t have Genesis on my bingo card”. The Genesis spinoff “leaves very few players in the OTC market,” Boonen said.

Why should Genesis be supported?

If not the biggest, Genesis is among the top companies behind crypto interest generation offerings. The company, which is a unit of the Digital Currency Group (DCG), is used by crypto firms and exchanges, including resource-poor investors, to generate returns on digital assets, among other services.

In the case of exchanges, when users deposit cryptocurrency to earn programs, the assets will be loaned to Genesis. Some funds then go to Genesis to borrow these assets with interest, which are then paid back to exchanges and then back to users. In this case, where Genesis funds are trapped on FTX, exchanges cannot respond to withdrawal requests from retail users, just as Genesis is unable to respond to customer requests.

This scenario is already in play with the Winklevoss brothers’ cryptocurrency exchange, Gemini, which uses Genesis as Gemini Earn’s only official lending partner. The exchange suspended withdrawals on the yield earning program on October 16, due to the situation at Genesis.

So, if Genesis falls, the outcome could lead to more cryptocurrency services shutting down, especially in the area of ​​yield, which is essentially a strike for retail users. Judging by Reuters’ report, it’s obvious that Genesis needs at least $1 billion in funding to become solvent. And while it’s unclear how far B2C2 wants to go with its relief plan for Genesis, the company could save the industry from another slump by offering to ease the cash crunch.